Slow Progress - Not There Yet

A Deutsche analyst sees high yield, high risk bonds defaulting at 53% over the next five years. WOW! That is nearly twice the Moody's estimate and from what I have read a bit over the top. Nonetheless, a nice attention getter and perhaps a sobering reality.

http://www.nakedcapitalism.com/2009/04/deutsche-analyst-high-yield-defaults-to.html

You Darn Protectionist You

From U.S. stimulus plans that require the money to be spent on U.S. companies to other steps countries are taking to make themselves more competitive versus other countries, protectionist issues are cropping up left and right. History has shown these types of measures to be ill-advised. During the Great Depression, the U.S. took on protectionist measures big time and we isolated ourselves from the rest of the world. The extreme almost allowed Hitler to take over Europe. But for Japan's wake up call in Hawaii we may all be speaking German now. In another stroke of what might be referred to as protectionism, many countries are working very hard to keep their currencies at a point where the exchange rate is favorable to their domestic exporting companies. Go figure.

http://www.nakedcapitalism.com/2009/04/are-competitive-devaluations-starting.html

Punish Them Enough and They Will Not Come

I had an interesting comment recently about the possibility of the Obama Administration making it so painful for companies to get government aid - painful in terms of officers being fired, shareholders losing value and the like - that they would only do it as a last resort. I can only hope that is part of the master plan here. We certainly are not building in a lot of protection otherwise for taxpayers, but if taking the money means serious pain for those taking, we are protected. It does not appear that the plan is all the way there yet, but we can only hope. Still, why would you put forth a plan and then make it so punishing that you make sure no one uses it. Perhaps to save face - let me think about that one for a while.

http://www.nakedcapitalism.com/2009/04/congressional-oversight-panel-to-call.html

"Oh Jesus"

That is a quote from me when I opened this post on Calculated Risk. Seriously, within a second I said this under my breath - not to alarm my wife. The IMF is now warning of $4 trillion in losses. I am going from memory here but I believe about a year ago they were at a trillion and then 4-6 months ago they were at $2 trillion. To now double that figure is astounding to me. I have viewed them as not too conservative to date but also not too over the top. And that is what worries me about their new prediction. They are not doom and gloomers - they call it like they see it. And if they see it right. . . ?

http://www.calculatedriskblog.com/2009/04/report-imf-to-warn-of-4-trillion-in.html

Meredith Whitney has been right a lot over the past year or two and so she has a lot of street cred. She is now off on her own and still worth listening to. Yet if she is truly calling for house prices to fall another 30% I have to beg to differ (though a few select markets may get there). Overall, I think in real estate price drops the worst is behind us. Not all of it by any means, but the worst. Consider that prime mortgage delinquency rates are rising so the worst is not necessarily over but we are closer to the bottom than the top - in my opinion.

http://www.calculatedriskblog.com/2009/04/meredith-whitney-house-prices-to-fall.html

Done for the night as I am working on getting ready for an adoption. I am, nonetheless, trying to figure out why this recession is done. Why it has reached a bottom. I am not there yet.

Disclosures: I have some put options but they total about $3000 (well they originally did and are now closer to $2000). I did not bet the farm.

Did I mention I did a few thousand in put options last year in March and then the market climbed throughout April to the point my options were all down 50%-70%+. Well I eventually made money off of these, some over 500%. Go figure. I shook my head daily as the market went up last year not understanding why and I kept my options. I am now also shaking my head when the market goes up - admittedly, though, not shaking as hard as I did last year. Nonetheless, I am holding on to my put options, which now for the most part are down over 20%.

Disclosures Otherwise: None.